Good core performance; record backlog; outlook improved
SBM Offshore has made good operational progress, with underlying financial results ahead of our expectations. The Company continues to be on track in resolving its legacy issues. Directional Backlog reached a record level of US$22.4 billion including contracts for FPSOs Cidade de Maricá and Cidade de Saquarema for Petrobras, the Company’s largest orders to-date. Oil production commenced on FPSO Cidade de Paraty in Brazil, and a US$600 million project loan was secured for FPSO N’Goma. Post-period, the Company announced it had been awarded the FPSO Stones by Shell for delivery to the Gulf of Mexico in 2016.
Bruno Chabas, CEO of SBM Offshore commented:
“I am strongly encouraged by the headway we have made in the first half. We have secured several outstanding contract awards and are on a much stronger footing, having both remedied a significant legacy issue and strengthened our balance sheet. Our management team can now concentrate on running the business and progressing our strategic transformation. Our focus on FPSOs is at the heart of this and our prospects give me confidence in our performance for the full year.”
SBM Offshore is seeking to provide its shareholders and other stakeholders with clarity on business performance above and beyond the regular IFRS based disclosures. One complexity is that the Group’s business model combines turnkey sales with construction projects for its own lease and operate portfolio. SBM Offshore’s FPSO construction and lease and operate contracts are increasingly classified as ‘finance leases’ which adds further complexity by accelerating revenue recognition into the construction phase, well before rents are invoiced to and paid by the client. In this context, the Company is introducing ‘Directional’ reporting alongside IFRS. Directional1 reporting seeks to present revenue and results in line with operating cash flows. This extended reporting includes a Directional1 Income Statement and Directional1 Backlog as part of the Financial Review.
On a Directional1 basis, revenues were up 24% to US$1,669 million in H1’13, and underlying EBIT increased by 69% to US$297 million
- Letters of Intent for lease and operate contracts for two FPSOs from Petrobras (contracts executed post-period)
- Directional1 Backlog up by 36% to a record level of US$22.4 billion
- Cash at the end of the period was US$253 million; undrawn credit facilities of US$857 million
- Net debt at the end of June was US$2,300 million
- Agreement to decommission the Yme platform and settle outstanding issues with Talisman for US$470 million
- Successful 10% Rights Issue at €10.07 per share raised US$247 million